This paper studies the dual long memory of interest rate and volatility in China, by using the monthly interest rate of China from January 1996 to June 2008. On the basis of the newly proposed methods to describe the long memory, including the ARFIMA model, FIGARCH model and ARFIMA-FIGARCH model, the results reveal that there exists no long memory property in the first moment of the interest rate, but the long memory properties are significant to the second moment of the interest rate. Moreover, using the ARFIMA-FIGARCH model, we find that there exists no long memory property in interest rate, but the long memory properties are significant to the volatility of the interest rate. In consideration of the Student-t distribution, the results further prove that the interest rate has the characteristics of high peak and fat tail.

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